Grayscale: Bitcoin Likely Unfazed by Fed Rate Hike

On Wednesday, the Federal Reserve raised interest rates for the first time since 2023, causing the bitcoin price to move sharply for a short period.

The digital asset then stabilised and now trades about 1% higher over the past day.

Grayscale's crypto research team believes the Fed's decision will not significantly affect bitcoin.

In a Thursday note, Grayscale's head of research Zach Pandl wrote: "We believe yesterday’s move was a mid-cycle adjustment, not a cyclical change."

"And we doubt the one or two rate hikes expected for 2026 will lead to much change in capital allocation."

Historically, bitcoin has often performed well when interest rates are low, although not consistently. Past Fed rate increases have generally led to declines in the cryptocurrency's price.

Lower rates increase liquidity, encouraging investors to take on risk and purchase assets such as bitcoin.

Pandl noted that the Fed's 2022 rate hikes to combat inflation "probably weighed on the price of bitcoin" as they "meaningfully affected the opportunity cost of holding non-interest-bearing assets."

Pandl argued that the current situation resembles 1997, when the Fed executed a one-time hike and the Nasdaq continued to rise.

Bitcoin recently traded near $76,581, an 18% gain over the last month. In August, the cryptocurrency got a boost from reports that the U.S. Treasury would expand its liquidity-support buyback operations by at least double.

The United States faces an affordability crisis, with rising oil prices driving inflation that strains household budgets.

Fed Chair Kevin Warsh stated the central bank's focus on reducing inflation.

"The plain fact is that inflation is too high, and has been for too long," he said on Wednesday.

President Donald Trump has consistently called for lower interest rates. On Wednesday, he posted on Truth Social: "Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR."